At the American Bar Association's 10th National Institute on the Civil False Claims Act (FCA) and Qui Tam Enforcement this past June, Assistant Attorney General Stuart Delery stated that the Department of Justice (DOJ) has been emphasizing the use of non-monetary enforcement tools in FCA investigations to encourage adherence to best practices and incentivize providers to operate in a compliant manner. One such tool, which has become increasingly more common, is the corporate integrity agreement (CIA), which generally requires a health care provider to adhere to several invasive and often costly compliance related obligations, and in exchange, the Department of Health and Human Services Office of Inspector General (OIG) agrees to not exclude said provider. In the first half of 2014, the DOJ and OIG increased their usage of such non-monetary enforcement techniques to combat healthcare fraud by entering into several high profile settlements that included robust and extensive CIAs.

That being said, the emphasis on non-monetary enforcement tools has apparently not come at the expense of large financial penalties. FCA settlements and judgments have already resulted in recoveries of more than $2 billion in the first six months of 2014.

Non-monetary compliance requirements in 2014 settlements

Notable FCA settlements in the health care industry this year have underscored DOJ’s intent to use robust non-monetary measures.

Endo Pharmaceuticals and Endo Health Solutions, Inc.

On Feb. 21, 2014, Endo Pharmaceuticals and Endo Health Solutions, Inc. agreed to enter into a CIA and pay $197.2 million to resolve allegations of off-label marketing of the prescription drug Lidoderm in violation of the FCA. The case was initiated by three whistleblowers in a qui tam suit. As part of the settlement, Endo Pharmaceuticals is required to implement and maintain several enhanced compliance measures. For example, the CIA requires Endo Pharmaceuticals to create and monitor an internal risk assessment and mitigation program, conduct internal and external reviews of promotional and other practices, and make information about financial arrangements with physicians and certain clinical trial results publicly available. Additionally, key executives and board members must sign off on compliance certifications. Notably, Endo Pharmaceutical’s CIA also requires the drug maker to create a “grants management system” that will serve as the exclusive vehicle through which requestors may seek or be awarded medical education grants. This settlement showcases DOJ’s increasing desire to hold company executives accountable for compliance issues.

Halifax Hospital Medical Center and Halifax Staffing, Inc.

On March 11, 2014, Halifax Hospital Medical Center and Halifax Hospital Staffing, Inc. agreed to enter into a CIA and pay $85 million to resolve allegations of FCA and Stark Law violations based on a whistleblower’s qui tam. The alleged violations stemmed from Halifax’s contracts with six oncologists that provided an incentive bonus based on the value of prescription drugs and tests ordered by the oncologists and paid for by Medicare, as well as payments above fair market value made to three neurosurgeons. The CIA obligates Halifax to undertake a significant and costly internal compliance reform and to submit its federal health care program claims to independent review for the next five years. Halifax is also required to hire and pay for a legal reviewer to oversee provider arrangements and an additional compliance expert to aid the board in meeting its compliance oversight duties, both of whom will submit reports to the OIG.

On April 23, 2014, Amedisys, Inc. and its affiliates agreed to pay $150 million and enter into a CIA to resolve allegations of FCA violations, including false home healthcare billings to Medicare for ineligible patients who were not homebound and medically unnecessary services, contained in seven qui tam suits. The allegations also included Stark Law violations involving the provision of patient care coordination services to a Georgia oncology physician practice at below-market prices. The CIA mandates Amedisys to create additional compliance measures to avoid, detect, or report improper financial relationships with physicians and fraudulent billing practices.

Ashland Hospital Corp. d/b/a King’s Daughter’s Medical Center

On May 28, 2014, Ashland Hospital Corp. d/b/a King’s Daughter’s Medical Center (KDMC) agreed to pay $40.9 million to resolve allegations of FCA and Stark Law violations involving billing Medicare and Kentucky Medicaid for medically unnecessary coronary stents and diagnostic catheterizations, falsification of medical records, and paying referring cardiologists more than fair market value for their services. The CIA obligates KDMC to substantially reform its internal compliance program and commit to a third-party review of its federal healthcare program claims for five years.

Conclusion

While FCA settlements in the health care industry continue to reach hundreds of millions of dollars, and DOJ moves towards another banner year in financial recoveries, providers should expect increased non-monetary enforcement tactics through enhanced CIAs and other compliance requirements, such as mandating executives to certify compliance programs and initiating third-party oversight. While CIAs and other non-monetary enforcement tactics may not require a company to forfeit or pay funds directly to the government, their implementation and management can often be expensive and time consuming. The creation of a robust health care compliance program is a wise investment that can help any organization minimize risk and avoid the possibility of a government required and monitored program through a CIA.

Contributing Author

John E. Kelly

John Kelly is the founding partner of Bass, Berry & Sims’ Washington, D.C. office. John represents companies and individuals in criminal and civil litigation, government...